The International Trade Commission (ITC) is as popular a forum as ever for patent infringement disputes in the U.S. In 2011, 70 investigations were instituted in the ITC under Section 337 of the Tariff Act of 1930. That number compares to 51 investigations instituted in 2010, and is the highest number of investigations ever instituted by the ITC in a single year. Part one of this series explains why the ITC has become an increasingly popular forum and addresses two basic technical requirements that must be met to institute an action there.
So what’s the draw?
The ITC cites two primary reasons for the surge in Section 337 investigations:
- The availability of exclusion and cease-and-desist orders, which prevent infringing products from being imported into the U.S. and prevent sales of products already imported
- The relative speed with which matters move from institution of the investigation to decision by the ITC
The availability of exclusion and cease-and-desist orders in the ITC became more important after the Supreme Court’s 2006 ruling in eBay, Inc. v. MercExchange. In that case, the Supreme Court overruled years of district court and Federal Circuit precedent that practically guaranteed a permanent injunction as a remedy when a valid and enforceable patent is infringed. In eBay, the Supreme Court held that the traditional four-factor test for injunctive relief must be applied when a court is considering a request for permanent injunction, and irreparable harm is no longer presumed. As a result, it is now much more difficult to get an injunction, even when the infringer is a direct competitor. The removal of the threat of injunction in most patent infringement cases has significantly reduced the settlement value of patent infringement claims.
As for speed, some of the district courts that have been considered “rocket dockets” for patent litigation in the past have slowed over time due to court congestion. For example, while the Eastern District of Texas once boasted time-to-trial averages of 12 to 14 months, it now takes more than two years on average to get to trial in that court. In the ITC, on the other hand, the time to resolution is decreasing. In 2011, the average time to decision was 13.7 months, compared to 18.4 months in 2010 and 17.9 months in 2009. And the ITC is taking measures to accommodate the increasing caseload, hiring more attorneys to work on Section 337 investigations, replacing retired administrative law judges and allocating funds for a third courtroom to handle hearings.
Does your matter qualify for an ITC investigation?
Section 337, codified at 19 U.S.C. § 1337, provides remedies for the “importation into the United States, the sale for importation, or the sale within the United States after importation . . . of articles that . . . infringe a valid and enforceable United States patent . . .” Those remedies include an order excluding the importation of the infringing article and/or a cease-and-desist order to stop sales of infringing inventory that has already been imported into the U.S. Therefore, in order to be the subject of an ITC investigation, the allegedly infringing product must be one that will be or has been imported into the U.S.
In addition, you must establish an industry in the U.S. “relating to the articles protected by the patent.” 19 U.S.C. § 1337(a)(2). This industry requirement can be satisfied if your company has made significant investment in equipment used to manufacture products embodying the patented invention, has employed significant labor or capital to manufacture or sell such products or has made substantial investment in exploiting the invention. 19 U.S.C. § 1337(a)(3). While the exploitation prong can be satisfied by activities related to licensing of the patented invention, those activities must be specific to the infringed patent and the investment in such activities must be substantial.
Part two of this series will help you consider whether your business can tolerate the demanding schedule of an ITC investigation and will discuss the challenge of enforcing an order if you prevail.